15 Online Loans For Bad Credit (Feb. 2024)

Online Loans Bad Credit

Although there was a time when a poor credit score may have prevented you from obtaining even the smallest loan, the lending industry has become a more diverse place. In particular, the growth of the online lending marketplace has helped inspire an influx of non-bank lenders, as well as providing consumers with greater access to lenders from other geographic locations around the country.

In fact, today’s market has a hearty subprime sector, full of lenders happy to offer loans to those considered too risky by many traditional lenders. Online loans for bad credit are not nearly as few and far between as they once were. And while your ability to qualify for any given loan still depends on your individual financial situation and credit profile — as well as the type of loan itself — your options for finding flexible lenders are better than ever.

Personal Loans | Auto Loans | Home Loans

The Best Online Personal Loans For Bad Credit

The most all-purpose of loans, personal loans can be used for all manner of situations. This can include dealing with financial obligations, such as consolidating credit card debt or paying medical bills, practical applications, like remodeling part of your home, or even taking a vacation or engaging in other leisure activities.

Simply because a loan can be used for frivolous activities doesn’t mean it should be, of course. Personal loans are unsecured loans, with no collateral to act as security against default, so they are the highest risk loans for lenders to provide — and high risk means high interest rates.

This will be especially true in regards to short-term loans, such as those provided by cash advance companies, primarily due to their limited duration and fee structure. In fact, short-term loans typically carry the highest interest rates of any line of credit, averaging in the triple digits and topping 650% in some states.

Short-Term Cash Advance Loans

The diametric opposite of a long-term installment loan, short-term cash advance loans are generally repaid in a single lump sum, and can have term lengths as short as seven days. Short-term loans are best for emergency situations that need quick funding and can be repaid with your next paycheck or an anticipated windfall.

Short-term and cash advance loans are often limited in size, starting at $100 and capping out around $2,500. Our top-rated picks for short-term loan providers include large networks of lenders, most of which can provide funds in as little as 24 hours.

  • Short-term loans up to $5,000
  • Online marketplace of lenders
  • Funds available in as few as 24 hours
  • Simple online form takes less than 5 minutes
  • Trusted by more than 2 million customers
  • See official site, terms, and details.


Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
Up to $5,000 Varies Varies

See representative example

  • Quick loans up to $5,000 as soon as tomorrow
  • Submit one form, get multiple options
  • All credit ratings welcome — good or bad
  • Requires a checking account and $800 minimum monthly income to apply
  • No collateral or cosigner required
  • See official site, terms, and details.


Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$250 to $5,000 Varies Varies

See representative example

When seeking out a short-term cash advance loan, remember that you will be obligated to pay a very high interest rate for your loan, often in the form of a flat-fee finance charge. This can be as much as $30 for every $100 borrowed.

You’ll also need to repay the loan in a single lump sum, leading some borrowers who cannot meet their obligation to take out additional loans to pay off the first. This cycle often causes fees and charges to snowball, creating a large debt that the borrower cannot repay.

In fact, the short-term loan issue has gotten so out of hand in some places that the very nature of short-term loans may be changing, as organizations work to have new rules and regulations considered and enacted. For instance, short-term lenders in Colorado must follow a structure that requires all small loans to be repayable in installments.

Long-Term Installment Loans

With repayment terms that range from three months to six years, long-term personal loans are structured as installment loans, requiring repayment over time via monthly payments (or installments). Long-term installment loans are designed to finance larger projects or obligations that you will need to pay off over time, and tend to offer better interest rates than credit cards or other short-term financing options.

Using an online lending network is often the easiest way to find and compare installment loan offers and rates, which can usually be obtained with a single online form. The loan offer you select will largely depend on the interest rate you are comfortable paying as well as the size of the loan itself. Our top providers include lenders offering loans ranging from $500 all the way up to $35,000.

When considering the terms of your installment loan, be sure to crunch all of the numbers rather than simply looking for the lowest monthly payment. The longer it takes to pay off your debt, the more interest you will end up paying, considerably increasing the total cost of the loan. You should seek to balance an affordable monthly payment with paying off your loan in a timely manner.

The Best Online Auto Loans For Bad Credit

In contrast to a personal loan, an auto loan is a secured loan, in which your automobile acts as collateral against default. In other words, if you can’t repay your auto loan as agreed, your creditor can repossess your vehicle and sell it to regain some of its losses.

On the plus side, the presence of a form of collateral as security for the loan decreases the overall credit risk for the lender. This means overall interest rates and fees will be much less than those for a personal loan or other unsecured credit lines.

In general, most subprime auto loan lenders will require you to have a minimum income to qualify for the loan, with the actual amount varying by lender and loan size. A typical income requirement will be between $1,000 and $2,000 a month.

Initial Auto Financing

Whether buying a brand-new car fresh from the factory or a new-to-you car fresh from someone’s garage, the chances are good you’ll need to finance the purchase with an auto loan. While this may have once meant a trip to the bank in your Sunday suit, today’s savvy auto shopper heads online for an easy way to compare lenders and offers from their living rooms.

Before you start the application process, you should have a particular vehicle in mind, as you may need to provide details about it on the application, including the year, make, model, and trim. Once you have your new (or newish) vehicle picked out, you can head over to our top-rated auto loan providers to start comparing offers from lenders around the country.

  • Network of dealer partners has closed $1 billion in bad credit auto loans
  • Specializes in bad credit, no credit, bankruptcy and repossession
  • In business since 1999
  • Easy, 30-second pre-qualification form
  • Bad credit applicants must have $1500/month income to qualify
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
3.99% - 29.99% 1999 3 minutes 9.5/10
  • Auto loans for purchase, refinance, and lease buyouts
  • Nationwide lender network
  • Get matched with up to 5 lenders that fit your financial profile
  • It only takes a few minutes and is free with no obligation
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1998 4 minutes 9.5/10

Similar to personal loans, auto loans typically have term lengths from 12 to 72 months, and the longer the length of your loan, the lower your monthly payment. However, even with the comparably lower interest rates of an auto loan, you will still add a significant amount of interest fees to the overall cost of your loan if you take the longest possible terms, so consider all the costs before determining the length of your loan.

Auto Refinance Loans

In the event that you end up with a higher interest rate on your auto loan than you are comfortable paying, you have the option to refinance your auto loan. Refinancing your auto loan involves taking out a second loan — one with a lower interest rate — to pay off the initial loan, ideally leaving you with a lower interest rate, a lower monthly payment, and/or a shorter loan term.

Many auto loan providers will offer both initial and refinance loans. That said, you may need to go to a different lender than you originally used to obtain a lower interest rate, especially if you have not improved your credit score or income since you took out the initial loan. An online lending network can help you find the very best rates for your credit situation.

10. RefiJet

  • RefiJet helps people lower their monthly auto payment
  • Pre-qualifying for a refinance auto loan does not impact your credit score
  • Nationwide network of lenders
  • Presents you with options from lenders that fit your situation
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 2016 5 minutes 8.0/10

While you can refinance your auto loan at any point in the loan’s life, you will likely have difficulty finding a lender if your vehicle’s value is less than the amount you owe. In this case, you may need to pay down your balance before you can refinance your current loan.

The Best Online Home Loans For Bad Credit

As with auto loans, home loans are secured loans, with the intended property acting as collateral against default. With typical periods of 15 and 30 years, mortgages have the longest terms of any other type of consumer loan. Both the secured and long-term nature of a home loan are reflected in the average interest rates.

Of course, the exact terms of your loan will primarily depend on both your individual credit and the type of loan. Those with lower credit scores will most likely seek out an FHA loan, which has more flexible credit requirements and down payment amounts.

Mortgage Examples

Regardless of the actual minimum down payment required by your lender, all potential homebuyers should aim for the ideal of a 20% down payment. Applicants who cannot provide a down payment of at least 20% will typically be charged Primary Mortgage Insurance (PMI), which acts as extra security against default for the lender.

PMI can add several hundred dollars to your monthly mortgage payment and should be included in your PITI calculations.

New Home Financing

As is the norm for secured loans, you’ll need to have a particular property chosen before you can complete an application for a new home loan. Not only will you need to know the exact purchase price to go through the loan process, but you’ll likely need to have an appraisal and/or inspection performed on the property before you can complete the loan, as well.

Due to the length of a mortgage loan, the total interest you pay over the life of the loan can be significant — over $140,000 on a 30-year $200,000 loan at 4% APR — so it’s particularly important to ensure you get the best possible rate. Start your research with our top-rated online home loan providers to compare rates from both bank and non-bank lenders.

11. eMortgage

  • Get today's mortgage rates from the top mortgage lenders and banks
  • Easily compare and choose mortgage lenders with no obligations or fees
  • Review current mortgage rates side by side
  • Pick mortgage lenders that meet your specific needs
  • Compare rates from pre-qualified and approved mortgage lenders — 100% online, 100% free
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1979 4 minutes 8.5/10

Beyond the common features of interest rate, loan length, and down payment, prospective home loan borrowers should look carefully at any other conditions of the loan. For example, some loans will include a prepayment fee, which borrowers will be charged if they pay off their loan early.

Mortgage Refinance Loans

Refinancing your home loan will involve taking out a new mortgage (with better terms) to pay off your current mortgage. For those who have worked on improving their credit, or perhaps just got a bum deal the first time around, home refinance loans provide a way to lower your interest rate and, at the same time, improve your monthly payments or the length of your loan.

Refinance loans will have many of the same requirements as regular mortgage loans, including credit score, income, and down payment requirements. The majority of home loan providers will offer mortgages for both new purchases and refinancing — but not all, so do your research ahead of time. You can begin with our favorite providers, which offer both new and refinance mortgage loans.

  • Options for home purchase or refinance
  • Get 4 free refinance quotes in 30 seconds
  • Network of lenders compete for your loan
  • Trusted by 2 million+ home loan borrowers to date
  • Interest rates are near all-time lows
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 2004 4 minutes 8.5/10
  • Easy to OwnSM programs give options for those with lower income, limited credit history, and low down payment needs.
  • Provides the potential for minimal out-of-pocket expenses with seller contributions.
  • Offers loans that don't require monthly mortgage insurance.
  • Requires less cash upfront for your down payment and closing costs.
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1852 6 Minutes 8.0/10

As with auto loans, you can refinance your home loans at any point during the life of the loan, although some lenders may have their own rules on refinancing a mortgage they’ve recently issued. Additionally, be sure that your current mortgage doesn’t include a pricey prepayment penalty before starting the refinance process to avoid a big fee.

Government-Backed Home Loans

Unlike conventional loans, which are entirely financed by the creditor, government-backed loans are insured by a department of the federal government. For example, the popular FHA loans are insured by the Federal Housing Administration, providing extra security for the lender against the potential default of a borrower.

When looking for a loan provider, keep in mind that not every lender will offer every type of loan. Specifically, finding a provider for some types of government-backed loans, including FHA loans, may require researching several loan providers. Other government-backed loans, such as USDA and VA loans, may require prospective homeowners to apply through a department-approved lender.

  • Offers 100% Financing, Low rates and Affordable Payments.
  • Helps lenders work with low and moderate income families living in rural areas to make home ownership a reality.
  • Loans can be used for repairs and rehabilitation; physical disability equipment; connection fees, assessments or installment costs for utilities; and essential household equipment.
  • Loans can include closing costs and reasonable/customary expenses associated with the purchase
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1897 9 Minutes 9.0/10
  • For military veterans, service members, their spouses, and other eligible beneficiaries only
  • No down payment and no monthly mortgage insurance
  • The basic entitlement available to each eligible veteran is $36,000
  • Lenders generally loan up to 4 times a veteran's available entitlement without a down payment
  • See application, terms, and details.


Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies by Applicant 1944 9 Minutes 7.5/10

Because of the extra security of government-backed insurance, the requirements, including credit scores, are typically much lower for these types of loans than for conventional mortgages. That said, they will often have additional requirements, such as limitations on where the property is located (as with USDA loans) or the military status of the applicant (as with VA loans).

What Is a Bad Credit Online Loan?

The credit industry has made significant strides in providing loans to consumers with poor credit. You can now apply online for a wide array of loans even if your credit score is less than good (that is, your FICO score is below 670). A low score results from problems you’ve experienced paying your bills and/or having too much debt.

If you wonder where your credit score comes from, the answer is the three major credit bureaus (Experian, Equifax, and TransUnion). Each bureau collects data from creditors, lenders, and other data furnishers to compile the information into a monthly credit report on which your credit score is based.

The information providers are mainly creditors that track your loan activity, including new accounts, debt amounts, and payment history. The two most important things you can do to improve bad credit are make timely payments and reduce your overall use of credit.

FICO, the predominant credit scoring model, bases 35% of your score on your payment history. You should see your score slowly rise if you consistently pay on time.

FICO Factors

But missed and late payments can rapidly send your credit score plunging. The credit bureaus track payments that are 30 or more days late and record them in your credit report, where they remain for seven years.

Missed payments can forewarn more severe problems (i.e., collections, repossessions, foreclosure proceedings, bankruptcies, levies, garnishments, etc.) that may result in the lender writing off your account. These unfortunate events can remain on your credit reports for up to 10 years, hampering your access to new credit.

In addition, not paying secured debts can cause you to lose your home, car, or other collateral.

If you find it challenging to pay multiple debts on time, consider a debt consolidation loan to reduce the frequency and amount of monthly payments. For example, you can use the proceeds of a personal debt consolidation loan to pay off your credit card debt and then repay the loan in affordable monthly installments.

The second major factor (30% of your FICO score) that affects your credit is your use of debt. FICO uses the credit utilization ratio to quantify your credit card debt. It’s equal to the credit you are currently using versus your total available credit, and values above 30% hurt your score. Reducing your credit card debt to below 30% of your credit limits can quickly boost your credit score.

Until you can improve a bad credit score, you’ll face high interest rates when you borrow online. Personal loans have APRs of up to 36%, more expensive than home equity and automobile loans. This expense shouldn’t surprise you, as you don’t secure personal loans with collateral, and, therefore, lenders assume an increased risk of losing money if you default on payments.

Payday, pawnshop, and title loans are costly, with triple-digit APRs and high penalty fees. Avoid these loans unless you genuinely have no other loan option.

How Do I Get an Online Loan For Bad Credit?

You can do an internet search and locate a suitable direct lender, but a much better way to obtain an online loan for bad credit is to use a lender-matching service like those reviewed in this article.

Lenders that serve consumers with bad credit may not require applicants to have a minimum credit score, although scores may influence a lender’s approval decision. Virtually no lender will approve a loan to someone currently undergoing bankruptcy procedures.

Most online lenders allow you to prequalify for a loan before you formally apply. The significance of prequalification is that it does not harm your credit score.

Direct Lenders vs. Lending Networks

Requesting preapproval for a loan or credit card usually doesn’t trigger a hard credit check by the lender. A hard credit check, which can slightly harm your credit rating for up to a year, only occurs with your authorization when you apply for new credit.

Using a lender-matching service allows you to prequalify for a loan without cost or obligation. The service processes your loan request and, if you receive preapproval, links you to one or more of the most suitable direct lenders that will accept your loan application.

The prequalification step usually requires you to submit only a limited amount of data, including your name, ZIP code, email address, phone number, age, and other primary data.

On the other hand, applying for an online personal loan requires more extensive information, including:

  • Proof of identification: A driver’s license or other government-issued photo ID will usually suffice. You must also provide a valid email address and phone number.
  • Proof of age: Your ID document may include your age, but you can also provide an official birth certificate as proof.
  • Proof of address: You can submit rent bills, mortgage statements, utility bills, or similar documents to verify your address.
  • Proof that you are a US citizen or permanent resident: Acceptable documents include birth certificates, passports, visas, and green cards. You will usually have to supply your Social Security number.
  • Proof of income: You can prove income with pay stubs, bank statements, records of bank loans, invoices, tax returns, or other documents that prove you earn the minimum required income. You must also disclose your existing debts and monthly rent or mortgage payment.
  • Bank account for direct deposit: You must have an active bank account in your name to receive your loan proceeds, even when you aren’t dealing with bank loans. Many lenders also require access to your bank account to draw payments when due.

Collateralized loans may have different requirements. They will undoubtedly need information about the home or vehicle for which you are securing the loan, including an inspection of the property and title.

Assuming you have the required documents on hand, you may be able to wrap up a personal installment loan on the same day and receive the proceeds by the next business day. Car loans can occur even quicker, allowing you to purchase or refinance your vehicle on the same day. Mortgages and home equity loans may take up to 30 days.

Before handing you the loan proceeds, your lender will require you to sign a contract guaranteeing your payments and describing the loan terms, including the consequences of missing a payment.

If you have poor credit, you may need to recruit a cosigner to guarantee fulfillment of your contract obligations. Cosigners share responsibility with loan recipients to ensure the lender receives payments on time.

Cosigners are most useful when applying for subprime unsecured loans. Most personal loan providers welcome cosigners to reduce risk and may even offer lower interest rates on cosigned loans.

Loan Cosigners

Cosigners also help you obtain equity-based loans when your income doesn’t quite meet the lender’s requirements. Lenders prefer turning to a cosigner for payment than repossessing collateral, an expensive and potentially messy alternative.

You can also benefit from having a cosigner if you have recent late payments or accounts in collection. A lender may be willing to overlook these problems if the cosigner has good credit.

But you should not rely on a cosigner to make your payments for you, as doing so may result in alienating a friend or family member.

How Do I Compare Bad Credit Online Loan Offers?

Buyer’s remorse is a terrible feeling that you can avoid when loan shopping by paying close attention to several factors that separate the good loans from the bad, including:

  • Loan amount: You know how much you want to borrow but not necessarily how much a lender is willing to approve. If you have bad credit, you may qualify for only a modest personal loan in the range of $200 to $5,000 (although some lenders may offer more). Secured loans are based on the value of your equity in the collateral property. A lender-matching service can attempt to find you a lender willing to provide the loan amount you need, but you may have to settle for less.
  • Loan term: A loan’s term is its repayment period. A payday loan may have a one-week term, whereas mortgage terms can extend 30 years. An installment loan is convenient because it breaks your debt into affordable chunks that you repay each month. Most personal loans offer a repayment term of at least three months, with some providing terms of up to seven years. Vehicle loan terms of up to eight years are commonly available, and many home equity loans and lines of credit extend for seven years or more.Consider a $7,000 loan with a 15% APR as an example of a loan term’s impact. A 24-month repayment period will result in monthly payments of $229.41 and a total of $1,145.76 in interest. Compare this to a loan with a 60-month repayment term, which breaks down to $166.53 in monthly payments and $2,991.77 in total interest. Longer terms result in lower monthly payments but higher overall interest fees.
  • Annual percentage rate: A loan’s APR is the amount of interest it would charge over one year. All other things being equal, you’d prefer the loan with the lowest APR. Lenders often advertise a low APR available to a borrower with good credit but expect to pay considerably more if your credit is poor.Let’s revise the loan term to 24 months in our hypothetical $7,000 loan. At a 6% APR, you’ll pay $310.24 monthly and $445.86 in total interest. A 16% APR results in monthly payments of $342.74 and $1,225.80 in interest. The lower APR provides smaller monthly payments and savings of $779.94 in interest.
  • Fees: Direct lenders (but not lender-matching services) usually tack on one or more charges that make loans more costly. These may include application, origination, and annual fees. In addition, loans often carry prepayment penalties and fees for late or returned payments. Check a loan’s complete fee structure before signing or e-signing the contract. You may be able to avoid some fees by choosing the right lender.
  • Qualification criteria: Each lender sets its own eligibility standards. The ones in this review are open to borrowers with bad credit — within reason. If you don’t have a stable income, you may have trouble landing a loan, even if it is secured. You can check your credit reports (available for free from AnnualCreditReport.com) before applying for a loan to see whether any mistakes in your credit history are unnecessarily depressing your credit score.By understanding your credit standing, you can concentrate on lenders that are more likely to approve your loan. You don’t want to waste time applying for loans beyond your reach. Nevertheless, many loans for bad credit are available if you can handle the payments and fees.
  • Collateral requirements: You can increase your loan access by posting collateral, such as your home or vehicle. Other forms of acceptable collateral include cash, securities, boats, insurance policies, collectibles, antiques, fine art, and jewelry. You give the lender a lien on the property when you post collateral, allowing seizures without a court order. In contrast, providers of unsecured loans must resort to lawsuits and collection agencies if you stop making payments.
  • Flexible terms: Some loans are more flexible than others. For example, you may get a better deal if you agree to automatic payments. Credit unions offer unusual flexibility with loan interest rates, especially to longtime members. You may also come across lenders offering special benefits and promotions, such as cash bonuses for new borrowers.

To compare online loans, you’ll need to read the Schumer Box and the disclosures each lender must make available to prospective clients. You can begin the process by clicking on the START NOW links in our reviews and find the website with the lender’s terms and conditions. Be sure to read and understand all the fine print, lest you fall prey to unwelcome surprises.

What Is the Easiest Online Loan to Get With Bad Credit?

Bad credit need not prevent you from getting a loan. The different loans available to you include:

  • Online personal loans: This type of loan is a good choice for consumers who don’t want to post collateral and prefer to repay in monthly installments. The biggest obstacle to these loans is not having enough monthly income to repay the loan.
  • Vehicle loans: Your car acts as collateral, meaning the lender will repossess it if you don’t make your payments on time. You can also refinance your vehicle to get a cash-out loan up to the amount of equity you have in the car.
  • Home loans: It’s not especially easy to get a mortgage, but neither is it all that hard. It depends on the property serving as collateral. A home equity loan is easier to obtain and is based on the excess of the home’s value above the mortgage balance. With any home loan, the lender can foreclose on your property if you fail to make timely payments.
  • Payday loan: This is a type of no credit check loan that is easy to get if you have a steady job or receive government benefits. But the interest rates are predatory and can send you into a debt spiral that may end in bankruptcy.
  • Payday Alternative Loan (PAL): A good loan option for credit union members who’d rather avoid payday loans. Developed by the National Credit Union Administration (NCUA), PALs are standardized loans offered by participating credit unions at reasonable interest rates. The amount you can borrow through a PAL is limited to $2,000.
  • Pawnshop loans: These are very easy to get yet also very expensive and risky. Your loan amount is typically 35% to 65% of the pawned item’s value. If you don’t repay the loan by a set date, you forfeit the property, which the pawnbroker can then sell to recoup the loan. Expect to pay triple-digit APRs on these loans. On the plus side, you don’t need a job or a good credit history to get a pawnshop loan.
  • Credit card cash advance: Credit cards usually set a cash advance limit below the total available credit line. Once you are issued the card, you can get an advance without a further application or loan approval step. But cards for subprime consumers typically charge high APRs on cash advances and set tight limits on loan amounts.
  • Friends and family: The ease of obtaining a loan from a friend or family member depends on your relationship with the lender and the lender’s ability to fund a loan. At best, you may get an interest-free loan without a definite due date. At worst, you may permanently alienate a loved one by failing to repay.

As previously mentioned, you can considerably improve your loan approval chances by recruiting a cosigner. Remember that failure to repay the loan will hurt both of your credit scores.

How Long Does It Take to Borrow Money Online?

If you require a cash emergency loan, you’ll want to receive your loan proceeds as soon as possible. At best, a lender will deposit your money into your bank account on the same day it approves your loan.

More often, it will take one or two business days to receive a personal loan or vehicle loan and longer for a home loan.

If you own a credit card and need immediate cash, you may be able to get a cash advance from the card at an ATM or bank. The card’s fine print will describe the amounts available and any accompanying limits.

How to Make a Credit Card Cash Advance

Credit cards for bad credit typically have low credit limits and charge an APR of 25% or more for cash advances.

Can You Get an Online Loan With A 600 Credit Score?

Many of the loans reviewed in this article are available to consumers with a 600 credit score. Auto and home equity loans rely on your posted collateral rather than your credit score. Personal loans take credit scores into account, but those for poor credit may welcome borrowers with a 600 score.

Payday and pawnshop loans ignore credit scores entirely. Your ability to get this type of no credit check loan depends on your income or the value of your collateral. Both charge astronomical interest rates and you should avoid them whenever possible.

Are Online Loans For Bad Credit Safe?

Loan safety is a two-way street. Borrowers want financial protection from predatory costs and property loss, and lenders are concerned with borrowers defaulting on their loans.

Loans are safe if you understand the terms and can repay the loan on time. They become threatening when you miss payments and begin to incur extra fees, collections, repossession actions, foreclosures, levies, and other penalties.

Payday loans provide the least financial protection because your debt can snowball if you miss payments. Auto and home equity loans can quickly become unsafe if you can’t make payments on time, as you may lose your car or your home. Personal loans are safer since they charge relatively reasonable interest rates and do not require collateral.

Defaulting on almost any loan can ruin your credit, even if the lender doesn’t report payments to a credit bureau. The damage occurs when the lender turns the loan over to a collection agency that reports to a credit bureau.

Not repaying a pawnshop loan won’t hurt your credit, but you will lose the item you pawned.

How Do I Identify a Predatory Online Lender?

Predatory lenders, often called loan sharks, are usually easy to spot. They charge such high interest rates and impose such hard terms that it becomes almost impossible to repay the loan. As your payments lag, the lender adds fees that skyrocket the total loan cost.

Illegal loan sharks may inflict bodily harm upon you for failure to repay. Legal predatory lenders (i.e., payday lenders) impose financial pain rather than the physical type when you miss payments.

Some telltale signs that you’re dealing with a predatory lender include:

  • High fees
  • Difficult repayment terms
  • Prepayment penalties
  • Inflated interest rates
  • Targeting vulnerable populations
  • Adjustable interest rates that explode after a short period
  • Promises to refinance loans in the future
  • Repeated refinancings that siphon off more money
  • Ignoring the costs of taxes and insurance for mortgage loans

In general, whenever a loan pitch seems too good to be true, it is, and you should avoid it.

Always Borrow Responsibly to Avoid Credit Damage

Despite popular opinion, bad credit doesn’t make obtaining a loan impossible, just more difficult — and more expensive. Always keep in mind that just because you can get a bad credit loan doesn’t mean you should.

Only borrow funds you can actually afford to repay, and always research and compare your options to ensure you have the best possible rates and lowest fees.

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